What You Need To Know About High-Risk Pools

Approximately a quarter of the population under the age of 65 are thought to have a pre-existing conditions1. Under the ACA, individuals cannot be denied healthcare coverage due to pre-existing conditions, and plans do not have a spend-ceiling which limits how much spending can occur to manage the health of these individuals. If the ACA were repealed without replacement, individuals with pre-existing conditions who rely on the individual (non-group) market for healthcare coverage would likely be denied coverage and be left without a health insurance option. In 2010, approximately 19% of applicants for non-group health insurance coverage nationwide were denied2.

As the current administration moves forward with the repeal of the ACA, one popular idea to cover individuals with pre-existing conditions is the creation of “high-risk pools”. Individuals with pre-existing conditions who are denied coverage in the individual market would be eligible to receive health insurance in a “high-risk pool”. The basic concept behind high-risk pools is that individuals with high expected healthcare costs enroll in a separate insurance plan than the general “healthy” population; these high-risk pool plans which would otherwise be extremely expensive to administer are subsidized by the state government.

Prior to the passing of the ACA, 35 states had high-risk pools to cover individuals who were otherwise denied healthcare coverage. Each state ran high-risk pools in a different manner, but many of the states turned down applicants who wished to receive healthcare coverage through high-risk pools. The reason for this was the limited budget states allocated to offer subsidized health insurance for these high-cost individuals was not adequate to meet the needs of the full population struggling to acquire healthcare coverage. California’s high-risk pool had a waiting list, and Washington’s high-risk pool denied coverage to over 80% of applicants1. Most of the states also had a spending limit for their respective high-risk pools, and after the high-risk pool budget was depleted – the individuals within these plans would be offered no more healthcare coverage. In an effort to contain costs, administrators of high-risk pools often offered a very limited scope or volume of healthcare procedures that they would cover. Additionally, many high-risk pools had annual or lifetime spending limits on individuals – meaning that no matter how urgent a procedure was for an individual, they could be denied coverage based on previous healthcare costs.

High-risk pools would save healthy individuals money on the front-end; as sick individuals are placed in separate insurance pools, general plan premiums should decrease. However, there is no elimination of costs (without loss of care) with high-risk pool plans, instead costs are reallocated. Under the ACA, insurers are able to cover individuals with pre-existing conditions because: (1) insurers bear increased costs (2) healthy individuals are required to get health insurance [individual mandate], decreasing the cost-burden on insurers, and (3) government subsidies assist individuals purchase health insurance. Under high-risk pools, the majority of these costs are consolidated into subsidies given by the government to the administrators of high-risk pool plans. The implementation of high-risk pools will require: (1) increased personal costs for individuals with pre-existing conditions, (2) increased taxes by the government in order to pay for subsidies, (3) increasing the budget deficit, or (4) poorer health care coverage for individuals with pre-existing conditions – or a combination of some/all of these features.